Dalton Petrie v. Electronic Game Card, Inc.

Electronic gaming has become ubiquitous; even slot machines are now made to operate at the push of a button rather than the pull of a lever. Electronic Game Card, Inc. set out to further this trend by producing electronic “scratch off’ devices for casinos, lotteries, and other gaming establishments. The company appeared to be flying high, with millions of dollars in reported assets as late as September 2009. But a little over a year later, Electronic Game Card, Inc. filed for bankruptcy and reported it was broke.

A group of investors filed suit, alleging that the company’s former Chief Executive Officer and Chief Financial Officer violated section 10(b) of the Securities Exchange Act, and that others violated section 20(a) of the Act. The Private Securities Litigation Reform Act of 1995 (PSLRA) provides that “all discovery ... shall be stayed during the pendency of any motion to dismiss” in a private securities litigation action. 15 U.S.C. § 78u-4(b)(3)(B). The complaint at issue in this appeal, the Third Amended Complaint, was based in large part on discovery materials subpoenaed before the company’s former CEO gave notice of his intent to file a motion for judgment on…